THE only suggestion that Due Diligencer can give the public is for them to read the disclosures that listed companies post on the website of the Philippine Stock Exchange (PSE). By doing so, they will understand how businessmen, who are mostly the very rich families in this country, use them – the public stockholders – for the listing of their company shares on the stock exchange.
Getting common shares listed on the PSE does not necessarily make a company public.
This suggestion is not, in any way, intended to underrate the efforts of the Securities and Exchange Commission (SEC) to make listed companies also public. Unfortunately, nobody among the stock market watchers even reviews the amended minimum public ownership (MPO) rule requiring family-owned and controlled corporations to sell at least 20 percent of their outstanding capital stock to the public, previously set at 10 percent.
By increasing the MPO to 20 percent, the SEC should have defined what the acronym is all about. Do these three letters apply to the entire outstanding capital stock or only to outstanding common shares?
The SEC officials should know that they are perceived to be more pro-business for reason or reasons only they know. That they should have been asked why they favor more Big Business is not for Due Diligencer to elucidate.
As suggested in the first paragraph, the helpless public stockholders have no recourse but to link themselves
with any of the insiders of listed companies. By perusing the disclosures, they would understand these filings even if some, if not all, lack the basic information that they need as investors.
Anyway, if the public investors would measure the popularity of listed companies by the number of outstanding shares, they would find a few of them to be “more public than others.” The phrase is in quotation marks because certain listed companies pretend to be “more public than others,” but that is true only in terms of the number of non-voting preferred shares that they have sold to the public.
Translated, the issuance or sale of non-voting preferred shares to the public means borrowing capital funds from them but not allowing them to elect their nominees to the board. This is why the public ownership reports (POR) of listed companies show only the number of common shares owned by the principal and significant stockholders and those held by the public.
Again, the public investors should become active stockholders of listed companies. After all, with their 10 percent MPO, they should be entitled to a board seat. Their problem lies in the public investors among themselves who prefer to remain passive. It would seem their only interest in accumulating listed common shares is to receive dividends, either in cash or in stock.
Back to disclosures
As public investors, the correct interpretation of the contents of every PSE posting is necessary for them to fully appreciate the full disclosure rule.
As defined by the SEC, full disclosure requires accuracy, relevance and timeliness, which could be simplified into ART, as I have written back on Feb. 2, 2014. The acronym does not belong to me but to Otilio Sandiego, then one of the SEC directors.
Should anyone among the public doubt the authenticity of a filing, he/she should report the findings to the SEC, which, as a regulatory authority, is tasked to look into the complaint. After all, what are SEC officials for if they don’t act on the grievance/grievances of anyone among the public investors?
Yes, as shortened to ART, a disclosure should be accurate, relevant and timely. If it lacks any of these three characteristics, then the omission could be intentional. In a case like this, the public investors should alert the SEC’s monitoring team and the PSE’s watchers of listed stocks.
Due Diligencer’s take
Reading disclosures between the lines is never the rule that governs listed companies. Everything in a filing should be clear enough for everyone to understand. It is up to the public to be on guard against incomplete filings. Any suspicious omission should be reported to the SEC and the PSE.
The public investors should never doubt the SEC’s capability to go after erring listed companies. It is better to have a regulatory authority than not having one at all. Being outsiders, they have only the disclosures to rely on for their investment decisions. This is the reason for ART.
Why would Due Diligencer emphasize the need for the public to be on guard against omissions in disclosures?
This a good question that should have been raised a long time ago, but to which Due Diligencer has no answer yet. The answer or answers should come from the SEC and the PSE as market regulators.
As a matter of fact, the public investors may want to know who are and should be watching any anomalous dealing by insiders of listed companies. For their information, would they be interested in surfing www.sec.gov.ph, which is the SEC’s official website? Just asking.